North Financial Advisorshttps://www.northfinancialadvisors.com
A boutique financial planning firm that specializes in providing fiduciary, fee-only advice to women and entrepreneursWed, 16 Aug 2017 16:33:01 +0000en-UShourly1https://wordpress.org/?v=4.8.1https://i0.wp.com/www.northfinancialadvisors.com/wp-content/uploads/2015/09/North-Financial-Square.png?fit=32%2C32&ssl=1North Financial Advisorshttps://www.northfinancialadvisors.com
3232103362905How to Keep Business Start-up Costs Lowhttps://www.northfinancialadvisors.com/how-to-keep-business-start-up-costs-low/
Wed, 16 Aug 2017 16:30:13 +0000https://www.northfinancialadvisors.com/?p=25111When you start a business, think about it like an experiment. You don’t have to commit and follow-through with something just because you started it, you can change your mind. Give yourself permission to stop doing things that aren’t working in your business. You must take the time to evaluate areas you can shift and change as part of the experimentation process.

One area where I see businesses making mistakes (and people do this in their personal lives too) is by letting expenses creep up unknowingly. They start a business and think they’ve got to have the latest gadgets or most glamorous office space, the best productivity software, and hire people right away. They don’t evaluate the return on productivity or the value (or lack of value) of spending that money. Slowly they add service after service with a recurring fee and eventually have to take out a loan to cover expenses. Before you know it, interest payments alone are eating up income, and years in, they’re still not making enough.

Here’s a secret. The most successful businesses I know spend the least amount of money, especially in their first years. This concept of “you have to spend money to make money” is false. If you control spending early on you’ll become profitable faster. You won’t have to beg for business to cover your expenses and you’ll buy yourself more options down the line to put the right people and services in place to maximize your business when the time is right.

How do you do it? By taking advantage of the share economy and the gig economy, of course. You don’t have to start a business with a full suite of people to take meetings and answer phones. You don’t have to buy a manufacturing facility, you can rent space in one that’s not being used all the time or is designed specifically to be shared by small business. You don’t have to hire full-time staff — you can probably find a part-time service that meets your needs until you’re ready to scale up to full-time staff. Never before has it been so easy to find short term help to work on a project, help with administrative tasks, or outsource marketing or accounting. These types of services make it much simpler, easier, and cost effective to start your own business today.

Of course, a decade ago many of these services didn’t exist and it was far less common to be a “location independent” entrepreneur. Now, in addition to being able to take a sales call half way across the globe, we can test out ideas and reach a mass audience through blogging, crowdfunding platforms and social media. We have more tools at our fingertips to talk to people and conduct valuable market research than ever before.

All this makes the idea of starting a business much more exciting and attainable because we don’t need to leverage our entire financial lives to get started. Startup costs tend to be much lower through the use of shared services and shared platforms. And as I mentioned, the lower you can get your costs, the more successful you’ll be. For these reasons, self-funding a business has become much more important today.

Becoming a business owner means that your personal and business finances are going to depend on one another. You want this business to ultimately help improve your personal financial situation. Controlling costs is an important side of the equation. Once you reach a certain level of income and you’re getting paid for the work that you do, you can consider ways to increase efficiency by adding products, services, or people to take on some of the work for you. At that point, as long as your costs don’t grow faster than your income growth, you’ll be doing ok. I have several methods of helping business owners think through these important decisions. I’ll also talk more about how to self-fund your business in an upcoming blog post.

If you’ve done the work upfront to make sure your business idea is right for you, you’ve market proven your idea, and avoided common business planning mistakes your chances of success increase exponentially.

Have you had success in keeping startup costs low for your business or cutting costs that had gotten out of control? Have you taken advantage of all the ways in which the gig economy or the share economy could help your business? Drop me a line and let me know!

]]>25111Avoid This Common Business Planning Mistakehttps://www.northfinancialadvisors.com/avoid-this-common-business-planning-mistake/
Fri, 04 Aug 2017 15:45:29 +0000http://www.northfinancialadvisors.com/?p=25013Here’s a scenario I see often. A client has a business idea. They think it’s a great idea but they haven’t done much, if any, customer development. Before they’ve even completed real market research to validate their idea, they’re thinking about color schemes and names, what their website and logo will look like or where the business location will be.

That’s the wrong approach.

The right approach is spending a ton of time talking to potential customers before you get into operational strategies for the business. Keep in mind you don’t and shouldn’t talk to people in a way that feels sales-y. You’re not trying to do your friends a favor so they “get in on the ground level” on this amazing idea. You’re raising awareness and developing a lot of information and data points that you can use to effectively market your idea. And, most importantly, you’re using the data gathering to find out if this idea is actually going to work.

If you do have a great idea people will be saying things like: “Where can I find this product/service? I really want it.” If you’re hearing that, it’s ok to move forward. If you’re not, it’s time to make changes to the idea.

If you‘ve made some of these mistakes in the past don’t fret too much. You can always shift, pivot or adjust your ideas. I always like to remind my clients to think about the business planning process like an experiment. If one thing doesn’t work, you test out something else. The planning is never static, it’s always changing.

It’s important to use the information you gather from your network to fine tune your idea. “Most business plans don’t survive first contact with customers,” according to Steve Blank, one of the founders of the Lean Startup movement. That’s why you need to speak to a lot of potential customers first before you start.

Here are three examples of how things can turn out if you do (or don’t) spend enough time upfront talking to potential customers.

Example 1: Failing slow

You have an idea for a restaurant because you love brunch and everyone around you loves brunch. You’ve worked in the food business in the past. And you see how much people are willing to pay for brunch. Therefore, you think, it’s a good business to be in. You immediate scope out a location and start thinking about your name and logo and you put a down payment on a lease. Then you start talking to investors. Six months later after you’re out all the money for the lease, you have to abandon the idea because it’s going to take more money than you have to see it to completion and you’re starting to find out the concept isn’t going to bring in the number of customers you want.

If you had taken the time to validate this idea by talking to potential customers you would have found out early on that the neighborhood where you want to be located already has too many brunch spots. You also would know that your target customers love donuts and not brunch in the morning. You missed an opportunity to get written up in the hyper-local blog that everyone in that neighborhood reads. You certainly wouldn’t have found out from other restaurant owners what the rate of failure has been for similar concepts. Nor would you have asked the question of failed restaurateurs, what do you wish you had done differently? Never forget that your network is important and the customer development process is vital to success.

Example 2: Failing fast

You love pickles, and you have the perfect recipe that all your friends and family love. In fact, you give your pickles as gifts and get rave reviews. You could make a side hustle business out of these pickles! Before you even think about names you start asking your friends and family – hey, where do you normally shop for pickles and how often do you buy them? If I sold these pickles how often do you think you’d buy them? What’s price point you normally pay for pickles? Are you happy with the pickle choices out there or are you longing for something different? Know any other pickle-lovers I can talk to?

As you ask the questions it becomes apparent that only a few of the people you talk to actually buy pickles with any frequency so maybe they’re not as excited about pickles as you thought. You also start doing some back-of-the-envelope math and find out that you’d need to sell 200 pickle jars per week to make it even worth your time. Then you start wondering to yourself, will I love making pickles when I have to make THAT many jars per week and only make a small margin for my efforts? The answer starts becoming clearer that you’d rather keep this as a hobby. You used your network to ask the questions, your expertise to make the pickles and found out that you didn’t have the kind of passion required to make this a full business. There’s nothing wrong with that at all. The customer development process prevented you from spending a dime on this business that you eventually found out wouldn’t quite work for you.

Example 3: Successful launch

You’ve been in international development for ages and have experience working both in government agencies as well as the private sector. You know there are certain times of year when your current organization and others like it bring on extra contractors to get through grant writing season. You’re motivated to become one of those contractors in the future because, while you gladly take three weeks of vacation per year, you’re yearning to be able to travel more and don’t like being chained to the desk anymore. You have an idea you want to pitch that involves turning your current role into a contracting role. Clearly, you have the expertise to do this and the passion for it since you’ve been employed in this industry for over a decade.

You use your current network (not necessarily in your direct line of supervision) to safely float the idea that you want to switch to contracting. You also talk to a few other people who’ve done it and ask what they would do differently if they had to do it over again. You ask about how steady the work has been and find out that after the first year things get pretty steady, but during the first year, it can be a little unsettling to not know where your next paycheck is coming from. Finally, you talk to a few organizations different from your own to find out when and how frequently they need extra help and you ask whether they’d be interested in putting you on their list of people to reach out to when that happens. They gladly say sure! You remember to ask whether they mind if their contractors work remotely. They say they prefer it and require extra insurance and cyber-security protections for all their contractors. That’s good to know – and this is something you probably never would’ve found out unless you asked about it. You have a market-proven idea, so now you carefully take it to your current supervisor to see if you can do the same thing at your current firm. You didn’t have to take on all the risk or spend any money to get your business “going” before you found out it would, in fact, work!

I’ve learned that when you rigorously use the customer development process you get three main benefits:

It gives you more chances for success

You can get the business up and running quicker

It informs you if you need to shift/pivot BEFORE you spend time/money on your idea

What have you experience while doing customer interviews to test out a business idea?

]]>25013How To Verify Whether Your Business Can Succeedhttps://www.northfinancialadvisors.com/how-to-verify-whether-your-business-can-succeed/
Wed, 02 Aug 2017 15:57:15 +0000http://www.northfinancialadvisors.com/?p=25007About 20% of businesses fail in the first year, according to recent statistics from the Small Business Administration. Only about 50% survive after 5 years. The reason is not that people are incapable or decide they don’t like being business owners. The reason, I think, is because new business owners don’t plan much beyond the first year and they don’t do the right research before they start. They neglect to understand who their customer is, what they want, and where the customer is going to find the product or service.

Perhaps more concerning, I see a lot of businesses forget about managing their personal finances and fail to build in adequate safeguards and contingencies with regard to their finances (personal and business). Saving up a long financial runway gives the business owner the best possible chance of success. Without it, the new business owner tends to make very reactive decisions such as taking on high debt or engaging in short-term thinking that turn into eventual failure. This is not the end of the world because we all can learn from failure. But much of this is completely preventable.

The first step you’re going to need to take once you have your idea is to validate whether this idea can succeed. I call this “market proving” your idea.

How to market prove your idea

Does your business idea make sense to anyone but you? Hopefully! But how do you know? You’re going to have to talk to people. Steve Blank, one of the founders of the Lean Startup movement calls this, “getting outside the building.”

Blank helped pioneer the idea of failing fast so that you don’t invest your hard-earned dollars on a product or service that is doomed to go belly-up within a few years. Customer development should be the focus of any startup’s business model, according to Blank. You’ve got to first seek external validation for your idea (it can’t make sense only to you), then develop the value proposition for your business (the reason why you exist), and then finally develop customer segments so you know how to reach your target audience. The following lays out a series of questions that you must answer before moving forward, taken from Steve Blank’s online lean startup course.

Seek external validation

You’ve got to get tons of data, not just through online sign-ups, email lists, or surveys. You have to talk to real-live people. Once you find someone you want to talk to (ideally someone who would be a potential target customer), start by introducing yourself and state you have an idea you’re trying to validate that does <whatever your idea does>. State your goal — perhaps something like — “to evaluate whether it’s a worthwhile idea to pursue.” And then finish up by saying all you’re looking for is information from an unbiased source (you’re not selling anything). Then jump into your questions:

What is a big problem that you have related to <your idea>?

How have you solved it in the past?

Is that solution sufficient?

How would you feel if you couldn’t have <this product/service>?

Based on what we talked about today would you be willing to see the service when it’s ready?

Also, would you introduce me to any other people that I should talk to?

Everyone likes to think they have a unique idea. However, finding out you have competition (even indirect competition) may be one of the very things that helps validate that you’re entering into a real market with real customers. The challenge will be in differentiating yourself from whatever alternatives exist, and that’s what some of these questions are designed to cover.

You’ll probably need to talk to a lot of people (more than 10 but probably not more than 100) to fully understand their needs. This is why having a network within the space you’re trying to break into is so valuable. The more you talk to people who say they’re ready to buy a product or service like the one you’re describing, the more you know you’re on the right track. However, don’t make the sole purpose of these interviews about selling or closing, it’s primarily about gathering information for further exploration. And, don’t put yourself in a position of asking only people you feel friendly with for feedback. You’re friends are more likely to feel bad about giving you direct, negative feedback, skewing your results.

Pay attention to confirmation bias here. Our brains will tend to place a higher weight on pieces of information that prove our current beliefs. Challenge yourself to spend extra time with someone if your idea falls flat with them. It may end up helping you further improve and iterate the service/product offering. This is another reason why you need to talk to dozens of people instead of just a handful.

If you don’t have a product that customers are ready to buy, you’re not financially ready to start your business.

Get serious about your value proposition

Once you talk to people to understand their needs and concerns, it’s time to get a few things on paper as a starting point for more research. Write down answers to the following:

What are you offering as a product/service?

Are you solving a problem? If so, what is it?

Are you saving time for people?

Making something easier for them?

Making something faster/cheaper to access?

Providing specialized information?

Providing a solution that different or better than other providers?

What are the alternatives your ideal customer will be evaluating?

You’ll need to specifically define how you solve a problem for each market segment you plan to target (see below). It’s ok to spend a ton of time experimenting with different variations to see what sticks.

Develop customer archetype(s)

Once you have an initial value proposition, it’s time to figure out how you’ll reach your target audience, informed by the interviews you’ve had. Jot down answers to the following:

Who are your target clients or customer segments?

What needs, demand or problem are you solving for each type of customer?

Where do they have pains or what do they stand to gain by buying your product?

What do they read?

Where do they spend time?

What do they like and where do they shop/get information?

If they were looking for a product or service like yours who would they ask first?

Where else would they go to find a product/service like this?

As a business owner, how can you access these sources or marketing channels?

How will you acquire your target customers and keep them as paying clients?

If you don’t have answers to some/all of these questions yet, it’s time to “get outside the building” and talk to more people.

A word of caution: How many customer segments are you working with? If it’s more than 5 or 10, it’s time to thin out your list. Try to find the top 2 or 3 customer segments where you stand the best chance of success. If you 1.) have a ton of data/information on these customer segments, 2.) know you have a solution that helps, and 3.) know how to get in front of them so they can find you, you’ll have a greater chance of success. With those 2-3 specific market segments, you can continue to refine your ideas by talking to more and more people in this target demographic to find out more and better ways to serve them.

Answering these questions and market-proving your idea will give you a foundation for writing a stellar business plan. In fact, answering these questions means you probably have 80% of your business plan written.

Notice I haven’t discussed anything related to financing this project or the costs of owning a business. These are very important things to figure out, of course, but at this stage, you must first find out if you have an idea that’s market-proven and ready to go. I will tackle the funding and financing aspects in another blog post.

Doing this research is time-consuming and challenging, but extremely beneficial. Always be focused on providing value to the customer. Don’t get bogged down in operations such as where you will host your website, where you will bank or what colors are in your logo until you’ve completed this comprehensive foundation for customer development.

]]>25007How To Tell If Your Business Idea is Right For Youhttps://www.northfinancialadvisors.com/how-to-tell-if-your-business-idea-is-right-for-you/
Wed, 26 Jul 2017 13:00:47 +0000http://www.northfinancialadvisors.com/?p=24969I hear this a lot: “I’d like to start a business one day, but I’m just not sure where to start – I don’t even have an idea.” If that’s you, you’re in good company — I find it’s a really common statement for my clients to make. Why start a business anyway? Even if you’ve done all manner of cool and interesting things in your career, you’re probably thinking you want a change one day. Or, maybe you don’t want to change industries, but you’re motivated by having more control over your schedule, your paycheck or your location. There are all sorts of reasons to look into starting a business.

You can’t get to there from here without starting somewhere. Don’t let the idea phase stop you in your tracks. I have a quick thought exercise that may help when you’re just starting to further define and brainstorm business ideas.

There are three important areas you should explore as you think about your ideas: your Expertise, Network and Passion. To increase your chances of success, the sweet spot is finding an idea that encompasses all three.

Expertise

Expertise is just what it sounds like. You know how to make the product or provide the service you’re selling. Or, if you’re not doing it yourself, you know how to hire the right people to provide the product or service.

What to do if you don’t have it:Ask for help! Get to know people who have experience and are willing to share it. Or, think about various forms of education/training you need to get the expertise. Shadowing others is often a much more productive way to learn than sitting in a classroom.

Network

There are two types of important networks you’ll need to succeed. Both kinds of networking will pay dividends and help increase chances of success as a business owner.

Potential Customer Networks – those who would be interested in your product/service.

If you haven’t yet, you should begin reaching out to people who would be ideal clients/customers. You don’t have to sell them on your product just yet. Start by building the relationships and understanding their needs/problems/willingness. You can use this information to fine-tune your business idea. If you’re going to start a business in a field where you’ve been employed for a while, reach out to people already in your network to let them know you’re making a transition. If you’re moving into a new field, start by finding just one or two people who you think would make good customers and see if they’ll help you with some market research. At the end, see if they would introduce you to one or two more people.

What to do if you don’t have it: Get busy building networks. Start doing as many informal / informational interviews as you can (and remember, you don’t need to sell your product to them just yet — you can start with simple market research).

Peer Networks – those who do something similar to you.

While it may be obvious you need to start developing a potential customer network, it may be less obvious that you should build a peer network of people who do something similar to you. There’s tremendous value in learning from those who came before you, even if they are in the exact same business as you. However, if you fear sharing information with a peer because you think it could hinder your competitive advantage, find someone in a related field. You’ll be able to increase your chances of success if you can learn from challenges and successes of someone who’s done something similar before – even if it’s not your exact product/service/industry.

What to do if you don’t have it: One option would be to join or form a study group or meet-up group of people from the same (or different) business types than you. You can also do more informal 1×1 networking in person or at industry conferences.

Passion

You need to have at least some passion for the industry or specific product/service you’re offering. It doesn’t necessarily need to be your life’s work and it doesn’t need to be something you want to do 24/7 (in fact, preferably it’s NOT something you want to do 24/7). However, some interest or intrigue is important. Many people make the mistake of assuming that turning your hobby into a business is always a good idea — it’s not. Often, once we have to do something for our livelihood it no longer has the same joy it once did, so keep that in mind.

What to do if you don’t have it:Passion is something hard to develop when you don’t have it. But maybe there are some adjustments you can make in the way you relate to the concept of passion. Another way to think about this is, does your business idea excite you in some way? Are you eager to solve a problem? It this something you struggled with that you now have a solution to? There are unlimited questions like this you can ask yourself to discover whether this is something you’re willing to spend time on and earn a living from. If the answer is still no, it might be time to pass on the idea.

Putting it all together

You may find you have two out of three easily, but the third seems more difficult. You’ll need to develop the third, or you will have some hurdles for your business. Owning a business is amazing but there are also lots of ups and downs. Don’t shoot yourself in the foot by skimping on the expertise, networking or the passion.

I’ve found this framework has resonated with many of my clients, and hopefully you find it helpful too. What do you think? Would you add any other circles to your diagram?

]]>24969How to Deter the Most Worrisome Cyber Threats Onlinehttps://www.northfinancialadvisors.com/how-to-deter-the-most-worrisome-cyber-threats-online/
Wed, 28 Jun 2017 16:00:49 +0000http://www.northfinancialadvisors.com/?p=1004Last week, I attended a cybersecurity roundtable discussion organized by the North American Securities Administrators Association (NASAA). The Federal Bureau of Investigation (FBI), Securities and Exchange Commission (SEC), Treasury Department and the security teams of small and large corporations were all there to discuss the current state of cyber threats and how financial advisors can protect their own businesses as well as their clients from attacks and data thefts. It was interesting to hear about all the ways in which cyber attacks can happen to normal people (not just fortune 500 companies) and so I wanted to share some of the key takeaways.

Security is something we at North Financial take very seriously. We use encrypted cloud based software and strong, unique passwords with two factor authentication where it’s available. I hope that you can use these tips to see how well you’re doing and adopt a few of these suggestions to improve your existing efforts. It’s especially important to pay attention as it relates to your financial accounts as well as personally identifiable information you have online.

Here are some common ways hackers work according the the FBI:

Sketchy websites and third party games run through web apps or popups within another program (like Facebook) have very few security frameworks or checks. Don’t assume they’re endorsed by the company that linked to them. Hackers can use these to run adware and scripts that run in the background and steal data/information/passwords. Pay attention to the URL before you click unknown links on websites or emails to verify if it’s a legitimate website.

Impersonating emails (phishing attacks) that pose as a service you use by copying the logo, verbiage and tone of emails you normally receive. Any links you click may look similar to the website mentioned in the email, but if you enter your credentials your data may be stolen or hacked. You have to pay special attention to the sender’s email address to see whether it’s valid and examine the email carefully. If you receive an email that seems fishy — don’t open it. Instead login the mentioned account directly via the web to check for any messages or information.

Spear phishing: very similar to phishing attacks above, but the hackers do significant research on an individual (using hacked emails and social media) to be able to further impersonate them in attempt to steal more information or trick users into providing signature authority on invoices or other money-stealing techniques.

Ransomware: Hackers use means listed above to hack your system, lock and encrypt your hard drive or cloud drives and refuse to give it back unless you send money. If you send money, they request more money and don’t give back the data. Best bet is to ignore and restore a backup. Of course, this requires you to have a backup in the first place. A physical backup versus cloud backup is safest.

Beware of free software. One the of the interesting comments made by one of the panelists was that if you use free software, “you’re the product.” Make it a point to understand how free software providers are using your data (by reading the privacy policy), and figure out whether you’re comfortable with that potential security vulnerability.

Here are the top 5 ways you can protect yourself as a consumer according to the experts:

Strong passwords: Set a unique and long password for every single site you’re on. But pay special attention to the passwords you use for financial accounts, social media and email and those you use as “keys” to other sites. Don’t overlap any of the passwords you use for these types of accounts. Make each one unique. If you use the same password for multiple accounts you’re putting yourself at risk as a simple gateway to one of the attacks listed above. Use a password vault to track and create long passwords (16+ characters) for all your websites. Do not make this a file on your desktop called passwords! The use of passphrases is another safe option – the longer the password, the better. Length and not necessarily complexity is the best way to deter hackers.

Two-factor authentication: Enable two-factor authentication where it’s available. This website: https://www.turnon2fa.com/ is a great resource to help you pinpoint exactly how to turn on multiple factor authentication for common websites. Many of them have varying levels of authentication that you can choose from. At a minimum you should be notified when there’s a new login to a site you use.

Practice email safety: Assume anything you send through email is public. Never send personal identifying data in email, messaging apps, or social media (such as social security, passport info, driver’s license, etc.). Assume all emails you send at work are viewable by your boss. See these additional tips for avoiding identity theft.

Use ad blockers: Download and run an ad block program, and control your browser settings to prohibit scripts or popups running in the background without you knowing. Keep your browser up-to-date (see #5 below). Many high-rated ad and popup blockers are downloadable plugins for your browser. The Brave browser is one option. It comes with ad blocking installed and it also has a mobile app with the same protections.

Patches/updates: Always download the latest security patches and bug fixes for your hardware and software including computer, tablet, phone, browsers and antivirus software. These patches will ensure the most recent breaches/problems are fixed for your machines. If you have a computer that’s too old to run the newest security patches consider upgrading.

If you’re a business owner consider the following additional steps and weigh the pros/cons/costs carefully:

Map out your “assets.” Where do you have data? Who has access to data on the web and physically through company computers? Which of these are most vulnerable in terms of client data? Do you have old computers with sensitive data in your home/office? Making a list of all the websites and cloud services you use and pay special attention to any data linkages (i.e. your google address/login also logs you in to twitter). A password vault like KeePass, LastPass, or Dashlane can do double duty as an asset inventory. Having an inventory makes it easier, in the event of a hack, to figure out how bad the damage is and how to go about fixing the problem(s).

Use a cloud backup in addition to a physical hard drive backup. If your cloud storage is ever hacked or compromised you’ll have a physical backup (see ransomware comments above). Make sure the drive is password encrypted. Furthermore, make sure your own computer’s hard drive is encrypted (see how for PC or Mac).

Consider cyber insurance either as an add on to another business liability policy or something stand-alone. Pay special attention to requirements of the policy. For instance, what systems and protections do they require you to have before your claim is valid? Also ask whether your policy covers just you and your business or you customers too. Find out what the claims process looks like and how the benefits work (deductibles/limits) if a claim is accepted. What are the exclusions? Is an investigation by a regulator covered? Are legal defense costs covered?

Contact the authorities as soon as possible if your business has been hacked. Time is of the essence to recover lost data or prevent further hacks.

Review the National Institute of Standards and Technology – NIST cyber framework or at a minimum the cyber framework FAQ. Depending on your industry, your primary regulatory agency or professional association may have additional or streamlined security guidelines.

If you have several offices or IT systems think about doing a vulnerability scan every so often. Companies such as Qualys have free or low cost version of the software and there are consultancies that specialize in finding vulnerabilities.

The bottom line is you should educate yourself on the latest ways hackers are getting data and take steps to address vulnerabilities. There is no shortage of hacks in the news right now (see here, here and here just in the last few months). Many of theses approaches I mention are somewhat tedious to set up, like two factor authentication or adopting a password vault system, but after you take these proactive measures, maintenance of your cyber protections becomes much easier. If you do the above, you’re going to deter hackers and make yourself a less attractive mark.

]]>1004What is the Financial Planning Process All About?https://www.northfinancialadvisors.com/what-is-the-financial-planning-process-all-about/
Thu, 30 Mar 2017 12:57:34 +0000http://www.northfinancialadvisors.com/?p=986Most of the time, I’m working with clients who’ve never had a financial advisor before. They come to me either thinking I operate more like a hedge fund or stock picker (I don’t), or they have a very specific financial issue they’re trying to tackle. Maybe they’re buying their first home, starting a business, or getting a handle on a retirement plan. Very few could rattle off all the areas of financial planning or explain what holistic advice entails.

Yet, comprehensive financial planning is something that everyone can benefit from. Even if you’re good at the dollars and cents part, you could probably still benefit from thinking through some new financial planning strategies. While you can research a lot of this stuff on your own, you have a day job that keeps you busy. At some point it’s much easier to consult an expert than to wade through mountains of news articles. A good financial planner can also spot issues that you might not be thinking about at all.

But what IS financial planning, exactly? In essence, it’s a wide-ranging look at your financial life and includes a review of the following:

The assets you own, the asset you want to own, and how that will impact your financial goals. Examples include buying a house (versus renting), buying a car, or getting a graduate degree.

Your income sources and cash flows.

Your spending habits, saving strategies and prioritization of goals, so you can live the life you want to live. This includes a discussion about life changes like getting married, planning for kids and their education, or moving into a new career phase.

Your current retirement account(s) to see whether there’s any necessary optimization to be found in the types of accounts, contributions or investment selections you’ve chosen.

Your other investments, and the purpose for those investments, to see if the choices make sense for your financial goals.

Identification of strategies that could optimize your financial position, including those related to saving taxes, types of accounts and when to use debt.

Your estate planning documents, and if you don’t have them, a recommendation for what you do need.

As you can see, financial planning covers a lot of behavioral and life decisions and working with a fiduciary means the advice will be in your best interest. If you’re a little unclear on what that means, I think this video posted on Lifehacker sums up the difference between working with someone who is a fiduciary compared with traditional broker/sales – type of “advisor” very well.

Before you get started working with a CERTIFIED FINANCIAL PLANNER™ professional, there will be an intro phase where you learn a little more about each other, talk about your goals, and learn about the fees and services offered. There will be a discussion about expectations and deliverables too. Then, you’ll move into the data gathering phase – which can be a heavy lift – but it’s a very important process. One area of your finances can impact choices in another, so it’s really a good idea to go as deep as possible into all the areas of your financial life, even if it means you need to dig up old statements. Getting all this stuff in one place is key for moving forward.

Your financial planner will then take all this information and analyze it, coming up with recommendations and action checklist for you. At this point you’ll probably sit down with your advisor to discuss everything and get a big-picture view of items to tackle. You’ll also get to take a look at projections and a timeline for your financial goals and look at trade offs you might need to make. Because, it’s not always possible to do everything on your list right away. Then you can work out a monitoring and implementation schedule that makes sense. One good thing about working with a financial advisor over time is that you always have someone to ask questions of when you go through life changes or your plans change, and you can talk about how it might impact your financial plan.

What other questions do you have about the financial planning process?

]]>986How to Reward Yourself With Your Tax Refundhttps://www.northfinancialadvisors.com/how-to-reward-yourself/
Wed, 22 Feb 2017 14:30:04 +0000http://www.northfinancialadvisors.com/?p=977And now for some good news. I read this year’s tax refund survey results from GoBankingRates.com, and according to their study most people plan to use their refund for either paying down debt or ratcheting up their savings. My financial planner brain says, “Yay! That’s awesome!”

What the survey didn’t say was whether the respondents had any plan for what to do with their savings. Having savings is good, believe me, but I’ve learned that having a plan for your savings is MUCH better. This is because when you have a plan, you’re more likely to stick to it and save even more toward your goals. It’s like rewarding your future self.

During this time of year all sorts of new and unexpected funds come our way. It’s tax season and it’s performance review season, so no matter your situation you’re probably expecting some sort of cash infusion soon in the form of a bonus, raise or refund. Given that, I’ve been getting these questions a lot lately — what should I do first? Spend? Save? Pay down debts? How much?

While it’s hard to go wrong choosing to blindly save or pay down debts, I’ve got some helpful strategies for making sure you save enough toward your goals and keep rewarding your future self. Here’s how to rock your decision making process.

Goals are more likely to be achieved when you write them down

Start by writing down all your goals. Go big and give yourself plenty of time for an open brainstorming session. Think about things you’d like to see in the short-term, think about things you’d like in the long term. Put down the things you think you’ll never achieve, but would like to. I call these “dream big” goals. And think about what your life would be like if you achieved them. If nothing comes to mind right away, you can also ask yourself this simple question to get started:

“Imagine yourself three years from now, what would’ve happened between now and then for you to feel happy about your progress?”

You can specify professional, personal, and financial goals, or all three. Hopefully that spurs you to get at least a few things listed.

Once you write them down, get specific

For all the goals dealing with finances, get more specific with them. Put a dollar amount on each one. That will help inform the priority and the timeline for making your goals happen. Your goals need to be actionable, or you’ll never achieve them.

If you don’t already have an emergency buffer, add that to your list. Target one month to start, and prop it up to 6 months worth of basic expenses over time.

If you have high interest rate debts like credit card debt, add that to your list. Get it paid down as quickly as possible. Carrying debt on the credit card is NEVER worth the rewards points!

Execute by adding new savings for each priority

Once these are out of the way, then you can begin adding funds toward your savings goals. If you have some long-term goals that are more than 3-5 years in the future, consider investing as an option. If you have short-term goals, set up a high-yield savings account and some sub accounts to earmark funds specifically for each goal. You can specify the amount more easily once you’ve done the work to write down and prioritize your goals. If after you’ve done this work you still want to run out and buy some new-fangled fashion piece or electronics with your refund, by all means, do it. That probably means it’s a really high priority for you. For most of us, though, I bet we probably have bigger items on our list. A trip, a house down payment, kids college fund, etc.

By now, it should be pretty clear that priorities and goals are going to be different for everyone. There’s no right path to take because it all depends on you. To help with prioritization, you can get creative with it and associate each goal with a picture or a vision board to make it more tangible (there are most certainly apps for this). Explore creating a spreadsheet or drawing a picture to show your progress visually. There are endless options here, but the important thing is, if you measure it, it tends to get done!

Knowing what you know now, what do you plan to do with your refund this year?

]]>977How to Avoid Paycheck Creep (Yes, That’s a Thing)https://www.northfinancialadvisors.com/how-to-avoid-paycheck-creep-yes-thats-a-thing/
Thu, 26 Jan 2017 13:45:07 +0000http://www.northfinancialadvisors.com/?p=958How often have you found that you’ve already spent your annual raise without even thinking about it? It’s so common, most of the time we don’t even have to think about it, it just happens, and that’s the problem. I call this phenomenon paycheck creep. Remember the days when you were just starting out and you lived paycheck to paycheck? Money was a source of stress. You thought, if I just had another $100 or $200 this month I would be set, no more stress. Fast forward to today. How many thousands of dollars in raises have you banked? And how often are you still spending way more than you wanted?

Unless you take action to prevent paycheck creep, it’s going to happen whether you intend it or not. After all, once taxes come out, it doesn’t seem like such a huge increase. And from there, it’s easy to allow ourselves an additional splurge as a reward, or find new recurring expenses that is supposed to make our life easier. Most often I see paycheck creep seep into transportation/travel budgets, bar tabs and restaurant spending. You don’t have to be a big spender on “things” for it to get out of control.

Money and Happiness

In the end, are you happier than when you were just starting out financially? Maybe a little, but it’s definitely not proportional to the increase in your salary. So why do you keep increasing your spending?

Plan Ahead

Here’s another pitfall, potential life changes are usually on the horizon which could cost us, and would be easily affordable if we just planned for it. For instance, a dental procedure, an increase in condo fees, a big vacation, or moving into a new place. When these things pop up, we act as if they were unexpected and we have to “make up the difference” in our budget somehow. But that’s not true, we can take the time at the beginning of the year to figure out some of these “what ifs” and make a budget to save for them.

The way you combat paycheck creep, is by taking a minute to respond and plan instead of merely reacting.

Reacting to financial situations like these are one of the big problems I see all the time. It’s something I wrote about in a 3 part series last year. Don’t react, plan ahead.

When I work with clients, I always suggest creating different savings accounts for goals. For instance, set up a separate savings account where you automatically put aside some money each month for your travel budget. When the balance reaches your target amount, you know you can plan and take a trip. It helps prevent you from taking advantage of that awesome flight deal now and then forgetting about the fact that you need to book lodging and ground transportation later, all of which could end up being more than you wanted to spend. The separate account also visually confines you to a budget for the year, because it’s easy to get the mental math wrong reviewing your credit card statements.

Short Term Thinking

If you don’t actively do something different, it’s really easy to react to financial changes without processing how your action (or inaction) may affect you in the long run. We often value the impact of things happening in the short-term more than planning for things happening in the long-term. This leads us to use short-term thinking to value buying things now when new money comes our way rather than setting aside savings.

This works against you when you want to do big things in the long run, such as retire one day, put a down payment on a house, or have a family.

You have an opportunity to fix this unproductive behavior. It’s a new year after all. Start by making a plan for the raises, bonus and/or tax return you expect to get this year.

Goal Setting Worksheet

Here’s a worksheet of questions to think through to help you set and stick to your financial goals:

What are your financial goals for this year?

What are your financial goals for the next 5 years?

What are some stretch goals you’d like to achieve, but you’re not sure how you’d get there financially?

What’s a financial estimate (even ball park) for each of your goals?

Knowing what you wrote down for your goals, how do you plan to earmark any bonus or tax return that you receive in the coming months?

What are your plans for “paying yourself first” out of your raise this year? Paying yourself first means putting funds toward savings goals before you spend on current consumption.

How do you plan to navigate upcoming changes in your life? Examples include a new job, relocation or shifting to a new life stage. Will they impact your goals above?

How would you handle a large unexpected expense of a couple thousand dollars? Would you have to borrow or could you cover out of existing savings? If you’d have to borrow, what’s a good target for building an emergency fund?

Just writing these things down is going to get you further than a lot of people. But it’s good to get some accountability as well. Here are a few bonus tips for sticking to your goals:

Tell a friend about your goals. Hold each other accountable with check ins, maybe on a monthly basis.

Work with an advisor to keep you on track and help you fine tune your projections and evaluate your financial decisions in depth.

Get detailed and make some decisions. You can’t just set simple goals like “I want to get out of debt.” You need to put dollars and cents behind it and tell yourself HOW you’re going to do it. Create “SMART” goals that are Specific, Measurable, Actionable, Reasonable, and Time oriented, so you have a deadline.

Write down an obstacle that could get in your way. It seems counterintuitive, but visualizing where you might fall short is a mental trick to help you avoid pitfalls. Once you acknowledge them, it’s easier to move past them and figure out how to work around them.

Make changes over time. If you try to slice and dice your budget all in one sitting, you probably won’t stick to it. That’s why I suggest starting with making a plan for new money coming in, like a tax return, to get you started.

What do you think? Did you learn anything you want to put into practice? If you filled out the worksheet, feel free to share it with me.

]]>958Most Read Posts of 2016https://www.northfinancialadvisors.com/most-read-posts-of-2016/
Wed, 28 Dec 2016 15:42:24 +0000http://www.northfinancialadvisors.com/?p=940Here are a list of the most-read blog posts from North Financial this year.

Do you work with a full-time fiduciary?

As a consumer it can be difficult to tell from marketing information or an advisor’s website if he or she is, in fact a fiduciary at all times when they are working with you. The best way to find out is to ask directly to see their fiduciary oath before you sign new paperwork. Mention this tip to friends and family so they can become aware of potential conflicts of interest too. Read the full article here.

21 Questions to Ask Your Financial Advisor

If you have a financial planner or advisor, here are some questions to ask the next time you have a meeting to dig deeper into your finances (including to get at the value you’re getting from the advisor). If you don’t have an advisor, these are some of the types of questions you can expect to discuss in a meeting. Read the full article here.

How to Build a Credit Profile for Your Business

Most small businesses, despite the seemingly constant online discussion about venture funding, funding rounds, buyouts, etc., have to figure out self-funding before they ever get to that point. In order to self-fund you’ll have to rely on some of your own savings as well as credit/lending options. Read more to find out how to build a business credit profile.

Give Every Dollar A Job

Many people I talk to have some savings and they are interested in planning and finding other avenues to save — but a lot of them haven’t really learned about how to make their money work for them. Cash reserves can be killer, read more to find out the solution in part two of a series on financial problems to avoid.

Focus on Financial Autonomy, Not Wealth

How long did you spend planning your last vacation? Maybe 10-15 hours? Compare that with financial planning — when was the last time you took that much time to review your retirement strategy and options in your 401k. Probably never. Here are some ways to motivate yourself in to spending some time on financial planning.

]]>940What’s One Key Indicator You Should Track?https://www.northfinancialadvisors.com/whats-one-key-indicator-you-should-track/
Wed, 14 Dec 2016 13:55:16 +0000http://www.northfinancialadvisors.com/?p=930I’ve been asked recently, “If there’s one simple thing I could do by the end of the year to put myself on a good financial footing for 2017, what would it be?”

It’s the perfect indicator to help you figure out if you’re making progress on the path to financial freedom. If you’re not already tracking your net worth on a regular basis, get in the habit today! You can use any number of online software programs or a simple spreadsheet to get started.

The basic accounting formula is assets minus liabilities equals net worth. But allow me to decipher it a little more:

What you own – What you owe = Net Worth

What you own are all the things that have tangible value. Easiest things to think about are your savings and checking account balances as well as your retirement account balances. But it could also be other things such as a home, an ownership stake in a business or other major investment that has value.

Then you have to subtract out what you owe. I’m talking about debts. These are items such as a credit card balance, a student loan, car loan, or mortgage. These decrease your net worth because you have to pay them back some day.

In order to reach financial freedom you need to grow your net worth. Now if you’re a young professional or have recently graduated from graduate school with some student debt, it’s very possible your net worth could be negative. Don’t fret!! Presumably, your education will open career doors for you and eventually you’ll earn a return on that investment in the form of human capital, experience, and salary.

Everyone has to start somewhere. The focus should be on building net worth each year. That’s why it’s so important to track as a key indicator on a regular basis to make sure it’s improving. If your net worth is lower than you want it to be, let it be a message to you that you have some work to do in 2017.

The primary way you increase net worth is by increasing your savings rate consistently and over time. No get-rich-quick scheme or fancy investment strategy is going to cut it. Now is the time to start putting an action plan in place to change behavior so that you can prioritize saving.

Financial freedom is expensive and you won’t be able to borrow for retirement one day. The more you save now, the less you’ll be scrambling to save in the future. If you’re feeling stuck, please reach out for a free consultation.